"The reason the markets aren't going lower is people are holding and hoping." Incidentally, there is a reason why hope is not a strategy: in the end, it always fails.
Japan has a nigh endless supply of insane Keynesians doing the same thing over and over and over again. But support is now growing around the world for the next round ofspending to be funded by “People’s QE.” The idea behind “People’s QE” is that central banks would directly fund government spending... and even inject money directly into household bank accounts, if need be. And the idea is catching on. That’s the monster coming to towns and villages near you! Call it “overt monetary financing.” Call it “money from helicopters.” Call in “insane.” But it won’t be unpopular. Who will protest when the feds begin handing our money to “mid- and low-income households”?
With the Federal Reserve still hinting at raising interest rates, but trapped by weak economic growth, will the next big move by the Fed be another form of monetary accommodation instead? Or, are the underlying dynamics of the economy and market really strong enough to shake off the recent weakness and continue its bullish ascent?
News That Matters
With Japan's economy already sliding into its 5th recession of the past decade, once pensioners open their retirement statements in a few weeks and find a 15% plunge in their purchasing power, Japan can skip recession and proceed straight to a consumer-driven recession. But wait, there's more: because if pensioners are angry now, wait until they learn that they have lost everything, after buying all those junk bonds that Carl Icahn is now actively selling with both hands and feet, because: JAPAN PENSION FUND TO INVEST IN JUNK BONDS, NIKKEI SAYS. And just like that, with or without Krugman's active economic advice, Japan's fate is sealed because much to Japan's dismay, "junk" bonds are called that for a reason.
It takes ignorance on an almost unbelievable level to try to claim that “nothing is happening” in the financial world right now.
"They don't understand the treacherous path they are going down. God knows where this is going. It's very dangerous and could be disastrous."
Remember when the commodity and gas plunge was supposed to be an "unambiguously good" tailwind for discretionary US spending, something which we warned over and over would never happen as the Obamacare "mandatory tax" surge pricing for healthcare insurance more than offset and discretionary savings? Moments ago another 825 or so soon to be formerly paid workers just found out the hard way just how clueless the vast majority of the punditry was when Chesapeake energy just announced it would terminate 15% of its workforce, or about 825 of its 5,500 most recent employees, as a result of the "current oil and natural gas prices."
This is an important story and shows how China and Russia are increasingly close and strong allies who are flexing their muscles and asserting themselves as rival superpowers to the U.S.
Republican presidential nominee front-runner Donald Trump, amid massively variant poll numbers (Fox >40%, WSJ ~21%?), plans to unveil his tax plan today, that, as WSJ reports, would eliminate income taxes for millions of households, lower the tax rate on all businesses to 15% and change tax treatment of companies’ overseas earnings. Trumps's plan claims to bring "sanity, common sense and simplification to the nation's catastrophic tax code," and, despite plans to end "carried interest" tax breaks - most loved by hedge fund managers - Carl Icahn has come out and endorsed Trump as "the only candidate that speaks about the country's problems."
- Headline winner: "Read Beyond Massive Job-Cuts Headlines: Labor Market Is Fine" (BBG)
- And speaking of lies: The More Yellen Talks Up Inflation, the Less Traders Believe Her (BBG)
- How Some Investors Get Special Access to Companies (WSJ)
- Victorious Catalan separatists claim mandate to break with Spain (Reuters)
- Russia seizes initiative in Syria (Reuters)
- Former VW boss Winterkorn investigated for fraud (Reuters)
- Investors Pull Back From Junk Bonds (WSJ)
It was all about China once again, where following a report of a historic layoff in which China's second biggest coal producer Longmay Group fired an unprecedented 100,000 or 40% of its workforce, overnight we got the latest industrial profits figure which plunging -8.8% Y/Y was the biggest drop since at least 2011, and which the National Bureau of Statistics attributed to "exchange rate losses, weak stock markets, falling industrial goods prices as well as a bigger rise in costs than increases in revenue." In not so many words: a "hard-landing."
"I do believe that markets ultimately prevail. I do believe that supply and demand will ultimately prevail. I’m confident that we will see that occur... The fact there are some very substantial new players coming into the sector and taking positions in gold and silver... I think that’s showing that things will change and I think things are in the works as we speak."
"Activist Investors", the relatively new classification for corporate agitators, want you to believe that their intellectual tactics/ strategies improve both corporate governance and shareholder returns. That may be true but they also seem to be involved in another, less savory, tactic, that is, inflating their company “ownership” claims with extremely large derivatives positions as outlined in SEC disclosure filings.